The E8400 has higher clock speed and FSB. For games and applications that fully utilizes the quad core, The Q6600 will be faster. For others that only support Dual Core or less, the E8400 will be faster. If you're doing a lot of multitasking, perhaps you will benefit more with the quad.

I think not a lot of games out there really support multicore up to that level. Probably only newer big title games.

I bet by 2009 most new games will support quad core. When that happens, 4 x 2.4GHz cores will be better than 2 x 3GHz cores. Plus, Q6600 has more cache. I'm also pretty sure that new games that I care about like Fallout 3 and Starcraft 2 will support quad core.

There are few games out there right now that support quads though. Crysis, Source Engine (Half Life 2), World in Conflict, Dirt, are the few that I know of. Games based off the Unreal 3 engine such as bioshock also benefit slightly from quads.

while this is true that more games are "making use" of multicore threading, the truth is NO game has yet been developed to truly run on 2 or more cores.
I remember reading about 1 game that is in development stages that is going to actually use multicore processing as its base operating structure however I cannot remember what game it is nor have I heard anything else lately about the development.
Apparently as was written by Gabe Newell ( AnandTech News: Valve's Gabe Newell talks about multi-core game development ) writing programming for SMP is an inherently difficult process so the difference between "making use" and actually being an SMP operational game are two different things
When we have a game that actually uses full core functionality and DX10 capabilities it will revolutionize game development and the gaming pc will pwn once more

Which is better? E8400 vs. Q6600. Also, which one would get a better clock when running on water?

I won't answer which one is better, I'm still juggling this one myself. But for clocks under water, I had both with the same wc setup. The Quad did 3.8Ghz while the E8400 did 4.3GHz - both stable for folding.

I think that the general consensus is that in the long run, ie.if you plan on keeping your CPU for as long as you can, a quad is a better investment. However, if you have the cash to buy new components as soon as they become affordable in the sub $300 range and then sell your old components, then benchmarks show the E8400 as the better overall performer right at the moment.